INVEST IN TURKEY · INVEST IN TURKEY December, 2014 Republic of Turkey Ministry of Economy ... • Turkey as an Energy Corridor ... Manufacturing Industry 2 Real Estate, Leasing and

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INVEST IN TURKEY

December, 2014

Republic of Turkey Ministry of EconomyGeneral Directorate of Incentive Implementation and Foreign Investment

For further inquiries: [email protected]

Republic of TurkeyMinistry of Economy

INVESTMENT

IN TURKEYIsmet INCE

Foreign Trade Expert

General Directorate of Incentives and

Foreign Investment

MINISTRY OF ECONOMY



2

• Location• Market Size• GDP Growth• GDP Per Capita• Demographics • Foreign Trade• FDI Figures• Logistics• Turkey as an Energy Corridor• Future Perspective

PART I



Where is Turkey?

3



4

World’s Biggest Economies

(GDP based on Purchasing Power Parity, Trillion Dollar, 2013)

Turkey is the 16th biggest economy



5

Europe’s Biggest Economies

(GDP based on Purchasing Power Parity, Trillion Dollar, 2013)

Turkey is the 6th biggest economy



6

GDP Growth (%)

Pe

rce

nta

ge

Source: TURKSTAT



GDP Growth of Selected Economies, 2013 (%)

4,1

grew 4,1



GDP Growth Rate Projections of Turkey (%)



GDP Per Capita ($)

10.782 $

Source: TURKSTAT

$



Source: Ministry of Development

10,8

7,9

4,1

0,1

-1,3

0,2 1,6

5,5

3,0

0,41,0 1,0

-2,0

0,0

2,0

4,0

6,0

8,0

10,0

12,0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Budget Deficit to GDP ratio

Maastricht Criteria : 3%



Demographics (Age Classes), 2013

MINISTRY OF ECONOMY



Foreign Trade of Turkey (Billion $)

Source: TURKSTAT

2013: Export: 152 billion $Import: 252 billion $

Estimated/2014:Export: 165,5 billion $Import: 262 billion $



Distribution of Trade According to Country Groups

Export Import Exp Share% ImpShare%Countries (2013) 151.803 251.661 100,0% 100,0%

A- EUROPEAN UNION 63.040 92.458 41,5% 36,7%B- TURKISH FREE ZONES 2.413 1.268 1,6% 0,5%C- OTHER COUNTRIES 86.350 157.935 56,9% 62,8%

1- OTHER EUROPEAN 14.214 41.319 9,4% 16,4%2- AFRICA 14.146 6.031 9,3% 2,4%

North Africa 10.042 3.508 6,6% 1,4%Other Africa 4.104 2.523 2,7% 1,0%

3- AMERICAS 9.711 18.981 6,4% 7,5%North America 6.580 13.953 4,3% 5,5%Mid-America and Carribean 1.004 1.362 0,7% 0,5%South America 2.127 3.666 1,4% 1,5%

4- ASIA 47.591 76.862 31,4% 30,5%

Near and Middle East 35.575 22.214 23,4% 8,8%Other Asia 12.017 54.648 7,9% 21,7%

5- Australia and New Zealand 538 1.318 0,4% 0,5%

6- Other Countries and Territories 149 13.424 0,1% 5,3%



Foreign Trade Figures between Brazil and Turkey

0

500.000

1.000.000

1.500.000

2.000.000

2.500.000

41.67989.818

48.979 50.165 69.355 103.458 121.882

229.914318.027

388.244

614.551

883.471

1.002.759936.096

563.318476.714

302.505212.121 236.091

401.826

566.293

798.576

934.782

1.172.669

1.423.868

1.105.890

1.347.525

2.074.354

1.770.094

1.408.806

876.983 853.049

Source: Ministry of Economy



FDI Figures (Billion $)

FDI inflows Number of Foreign Capital Companies

• 1923-2002 : 15 billion USD 6.000• 2003-2013 : 135 billion USD 36.465

Source: Central Bank of Turkey

* First six months



17

Source: CBRT

Share of Country Groups for FDI Inflows to Turkey



Top Five HomeCountries in 2013

Top Five Home Countries in 2014(As of end of July)

Source: CBRT

Ordering is based on equity capital inflow

Germany; 18,5%

The Netherlands;

9,8%

Russia; 8,5%

Azerbaijan; 7,8%Austria;

6,4%

Other; 49,0%

The United Kingdom;

13,4%Russia; 12,1%

Italy; 7,6%

Azerbaijan; 7,0%

Other; 29,7%

The Netherlands9,8%

The Netherlands30,2%

Shares of Country Group in FDI Inflows



Top Five Sectors in 2014(As of the end of July)

Top Five Sectors in 2013

Source: CBRT

Ordering is based on equity capital inflow

Source: CBRT

Manufacturing; 34,7%

Mining and Quarrying; 5,4%

Banking-Finance;

19,2%

Energy; 17,6%

Wholesale-Retail Trade;

11,0%

Other; 12,1%Banking-

Finance; 37,0%

Transportation and Storage;

2,9%

Energy; 22,8%

Wholesale-Retail Trade; 3,5%

Other; 12,3%

Manufacturing21,5%

Shares of Sectors in FDI Inflows



Year of Payment

Brazilian FDI in Turkey(million $)

2002- 2005 -

2006 1

2007 467

2008 52

2009 7

2010 7

2011 5

2012 4

2013 0

TOTAL 543

FDI Flows Turkey from Brazil



Sector Number of Companies

Wholesale and Retail Trade 6

Manufacturing Industry 2

Real Estate, Leasing and Business Operations 3

Construction 1

Hotels and Restaurants 2

Electricity, Gas and Water Supply 2

Training Services 1

Other Social and Personal Services 1

TOTAL 18

Sectoral Breakdown of Companies with

Brazilian Capital

Source: Ministry of Economy



Logistics

Europe’s biggest truck fleet

45 thousands trucks and 1,420 companies

1.2 million flights in 2013

2.6 million tonnes freight and 149.5 million passengers

25 th biggest fleet in the world

52 airports (3rd Airport in Istanbul under construction) and 76 sea ports

Total length of divided highways will reach 15 thousand kilometers.

2 High-speed rail lines in operation, 3 more lines under construction.



Logistics – High Speed Railways



Logistics – Highways



Logistics - International Flights

Turkish Airlines is flying to more countries and international flight destinations than any other airline in the world!



Turkey as An Energy Corridor



ENERGY MARKET



• Main Principles of FDI Regime• Establishing a Company• Real Estate Acquisition• International Investment Agreements

PART II



PROTECTION AGAINST

EXPROPRIATION &NATIONALIZATION

FREEDOM TO INVEST &

NATIONAL TREATMENT

GUARANTEE TO FREE TRANSFER

VALUATION OF

NON-CASH CAPITAL

RIGHT TO EMPLOY KEY EXPATRIATE

STAFF

RIGHT TO ACCESS

INTERNATIONAL DISPUTE

SETTLEMENT

3

Main Principles of FDI Regime



Main Principles of FDI Regime

Easy Company establishment,

Starting and operating a business on

equal terms with local investors

according to new Commercial Code,

All types of companies are allowed.



Company Statute and

Notarized signatures of founders

Deposit the initial capital in a bank and the %0,04 of the capital

to the account of the Competition Authority

Register with the Trade Registry and the Chamber of Commerce and/or Industry

Notarize Commercial Books

5



International Agreements

CUSTOMS UNION WITH THE EU

FREE TRADE AGREEMENTS WITH 21 COUNTRIES

• EFTA• Israel• Macedonia• Bosnia and Herzegovina• Palestine

• Tunisia• Morocco• Egypt• Albania• Georgia

• Montenegro• Serbia• Chile• Jordan• Lebanon• Mauritius

• South Korea• Malaysia• Singapore• Peru• Japan

BILATERAL INVESTMENT TREATIES WITH 94 COUNTRIES

DOUBLE TAXATION AGREEMENTS WITH 80 COUNTRIES



Legal Framework of Turkey-Brazil Investment Relations

• Avoidance of Double TaxationTreatysigned 2005, entry into force 2012.


Republic of TurkeyMinistry of EconomyMINISTRY OF ECONOMY

Real Estate Acquisition

For Real Persons

• No reciprocity requirement

• Acquisitions up to 30 hectares are allowed

• Requirement to develop a project within two years in case the acquisition of a vacant land

• Total area of real estates can not exceed 10% of the privately owned land in the town

For Foreign Companies

• Acquisition according to the provisions of special laws

For Turkish Companies

With Foreign Capital

• Companies controlled by foreign investors can acquire real estates to conduct business activities listed in the Articles of Association

• Permission requirement for the acquisitions in military zones and special security zones

• Exemptions for special cases



Regulations in the FDI Law

Liaison office operation permits are granted for maximum 3 years’ duration.

The permits may be prolonged for maximum 5-10 years each time according to the activity fields.

Regional Management Headquarter permits are granted for 10 years’ duration.

Liaison offices cannot carry out commercial activities or generate an income.

Liaison Offices

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=UhXHwdD_acgt4M&tbnid=ZaVVJdlf6gsC1M:&ved=0CAUQjRw&url=http://www.adecs-airinfra.nl/en/nieuws/news-archive/19-03-2013-adecs-airinfra-opens-liaison-office-in-turkey/&ei=qLTtU7PkLMnJ0QWg7YB4&bvm=bv.73231344,d.ZGU&psig=AFQjCNFD5MlIURkFMsJp5E-R4JG81OF6jA&ust=1408173462157378

http://www.google.com/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&docid=UhXHwdD_acgt4M&tbnid=ZaVVJdlf6gsC1M:&ved=0CAUQjRw&url=http://www.adecs-airinfra.nl/en/nieuws/news-archive/19-03-2013-adecs-airinfra-opens-liaison-office-in-turkey/&ei=qLTtU7PkLMnJ0QWg7YB4&bvm=bv.73231344,d.ZGU&psig=AFQjCNFD5MlIURkFMsJp5E-R4JG81OF6jA&ust=1408173462157378



Liaison Offices, in their first application,

are granted operation permits of 3 years

at most.

For extensions, offices are required to make an

application before the expiration of their

permissions.

The permits obtained for market research or

promotion of products or services of the foreign

company are not extended.

36



Extension Field of Activity Duration (Years)

Representation and Hosting 5

Control, Inspection and Provision of Local Suppliers

5

Technical Support 5

Communication and Transfer of Information

5

Regional Management Headquater

10

37





Future Perspective

Next Economic Giants – MINT Countries



• Corporate Taxation• Free Zones• Labour Costs• Energy Costs

BUSINESS PRACTICES

40



Corporate Taxation

Corporate Tax Law No: 5520 has beenenacted on 21 June 2006

The corporate income tax rate is 20 %.

The normal fiscal year-end is December 31st. The calendar year is not appropriate because of the business, permission can be obtained from the Ministry of Finance for an alternative fiscal period.

!Tax benefits and incentives in Technology DevelopmentZones, Industrial Zones and Free Zones could include total orpartial exemption from Corporate Income Tax.

Taxation

41



FREE ZONES

Free Zones Are Fenced-in Regions That;

• Have special regulatory treatmentfor the operating users in order topromote exports of goods andservices;

• Are regarded as outside thedomestic tariff area; thus, subjectto no customs duty or valueadded tax;

• Operate under a singlebureaucratic window;

• Offer a more conveninent andflexible business environment

Free Zones

42



Free Zones’ Main Advantages

• Facilitation of foreign trade (No customs duties and VAT)• No lengthy customs duty procedures • No limitation on transfer of profits • No time limitation for warehousing• Easy access to EU countries (Customs Union)• Reduced bureaucratic procedures • Strategic location• Favorable infrastructure standards• Supply chain management• Tax Incentives (Only For Manufacturer Users )

» No Income or Corporate Tax » No Income Tax for the Workers of Users that

Export more than 85% of Total Production

Free Zones

43



• Number of Free Zones: 19

• Total Users/Companies: 3.205

• Total Trade Volume: 22,5 Billion USD

• Total Investments Received: 3 Billion USD

Free Zones

44



Labour Costs

45 hours in a week

11 hours a day at most

Costs

45



Minimum Monthly Wage (gross and net)

US Dollar

Net Minimum Wage 399

Gross Minimum Wage 508

• Social Security premium payment (14%) 71

• Payment for unemployment insurance fund (1%)

5

• Income tax (15%) 29

• Stamp tax (0,66) 4

Total Deduction 109

Cost For Employer

Gross minimum wage 508

Employer’s share of social security premium (15.5%) *

79

Employer’s payment for unemployment insurance fund (2%)

10

TOTAL COST FOR EMPLOYER 597Source: invest.gov.tr

*As regards premiums that are paid in due time, as an incentive, a four-point reduction is applied (down from 19.5% to 15.5%).

Costs

46



Competitive Energy Costs compared to European Countries

Costs

47

Documents

INVEST IN TURKEY · INVEST IN TURKEY December, 2014 Republic of Turkey Ministry of Economy ... • Turkey as an Energy Corridor ... Manufacturing Industry 2 Real Estate, Leasing and